fractional reserve

fractional reserve

Money Creation
  • Why is the U.S. banking system called a “fractional reserve” system?
  • How can a bank create money?

BOOK== McConnell, C. R., Brue, S. L., & Flynn, S. M. (2015). Economics: Principles, problems, and policies.

400 word response

Please use some text from the book.

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The United States banking system is called a fractional system because the banks take deposits and after holding a fraction of the deposits as reserves, the other money is given as loans to borrowers or invested in income generating activities such as real estate among others. This form of banking is the most commonly practiced in most countries…

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fractional reserve

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